Bank funding cost claims 'mathematically impossible'

by Adam Smith21 Feb 2012

The big four's claims of rising funding costs has been rubbished by a major French bank.

The major banks have pointed to higher funding costs for their recent rate hikes, but Fairfax has reported that Societe Generale Asia Pacific head of interest rate strategy Christian Carrillo has called the claim "almost mathematically impossible".

According to Fairfax, Carrillo dismissed the majors' claim in a recent research note.

"The claim that the recent increase in mortgage rates is due to higher funding costs is very dubious. The mortgage hikes seem aimed at protecting their higher profit margins," Carrillo wrote.

Carrillo instead argued that nearly all sources of funding for Australian banks are less expensive that their post-GFC highs and have contunued to fall in absolute terms since the second half of 2011.

"Australian banks are essentially an oligopoly. They control most of the market anyway. They can effectively set rates where they want to," he said.

Australian Bankers' Association CEO Steve Munchenberg dismissed Carrillo's research, saying it lacked specific bank funding models.

"I would be surprised if he had access to the detailed funding of the banks on a bank-by-bank basis. You can't just look at the continuum of prices and average that out, because the banks tap the market at different times," he told Fairfax.


  • by David 21/02/2012 10:09:20 AM

    I suggest Mr Carrillo concentrate on his own bank and it's profitability. he is not exactly coming from a position of credibility given the state of the French economy and banking system.

  • by Ian Jervis 21/02/2012 10:09:55 AM

    Maybe Christian Carillo will get a Christmas card from Wayne Swan this year as he has certainly given Wayne some ammunition to shoot the banks with, whether it is right or not probably won't be of much relevance if there is some political mileage to be gained.

  • by Garry 21/02/2012 10:20:54 AM

    That's not surprising. The GFC gave the bank the perfect reason to start this process. Its the greatest lie ever perpetrated by the banks and the Govt is gutless when it come to standing up t the banks.